Responses to the European Commission’s Green Paper on improving long-term investment in European economies generally avoided the controversial proposals to scrap fair value accounting or reintroduce prudence that have been raised by some Member States of late.

The paper sought opinions on a broad range of issues around improving long-term investment. These included improving the capacity and efficiency of financial instutions to channel long-term finance. The Commission’s eventual aim is to encourage the channelling of funds into projects and assets that enhance the productive capacity of the economy in the long term, such as education, transport and eco-innovation.

Of the 292 responses, 21 came from public authorities, 163 from registered organisations (companies and similar) and 108 from individuals and others. Two thirds of the responses received were from stakeholders in Germany, France and the UK and cross-border EU organisations.

As part of its scope, the paper addressed predictable financing and the ability of existing accounting principles to address its aim. Responses to the paper on this matter were balanced and cautious. Though fair value accounting was deemed by many to have led to short termism in investor behaviour “to some degree”, it was also acknowledged that the issue was complex and there was no “perfect alternative”.

Among the proposals for improving accounting were adapting IFRS to take account of the specific business models of long-term investments, and complementing fair value accounting with further disclosures about the information reported in the financial statements. Many thought that a clearer overview of financial and non-financial information is required – particularly on future cash flows. A significant number thought that the finalised version of integrated reporting would be the best way to provide this clear overview, but there was concern that further change should avoid unduly burdensome reporting requirements.

On matters of governance, most respondents emphasised the need for transparency and accountability, particularly over remuneration, but also over the policies of proxy voting agencies (qualify) and on how often asset managers turn a portfolio. The idea of a common EU framework for encouraging institutional investors and asset managers to take environmental, social and governance issues into account complements an earlier idea for financial stability and economic development criteria to be included in the endorsement criteria for IFRS standards.